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partners. In specific individual cases, the selection of certain partners and an
organizational form is required
before
structuring and allocating the project task;
in other cases the decision-making process is reversed or the decisions are reached
simultaneously
. Nevertheless, the problem of partner selection will be discussed
first, before the forms of coalition are covered in Sect.
5
.
The selection of the most important cooperation partners requires that the
supplier under consideration has a rough idea of the breakdown of the service
package requested by the customer. This distribution to various suppliers is a key
influencing variable for the quality of the proposal and the product or the plant in
Principal
Supplier
coalition
External and
overall contract
Internal and
individual contracts
Interface
problems
Fig. 2
Purchase type: system purchase
364
B. Gu¨nter
the case of more complex capital goods. The approach to the decision-making steps
is described in
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(Table
5
).
The rough determination of the company’s own positions is significantly
influenced by the form in which the overall package of a cooperatively managed
range of services is broken down. A distinction can generally be made between a
horizontal and vertical breakdown of the service bundle (Roth
1977
):
• In the case of a
vertical
breakdown, the project is divided into complete
subplants, product group and functional units (for example: industrial plant).
• In the case of a
horizontal
breakdown, every subplant is divided into individual
sub-functions or processes (e.g. mechanics, construction, electrics, control, etc.)
and these services are jointly provided by a specialist, or specialists (for
extremely complex capital goods) for all subplants.
The importance of this basic decision, which is made by the customer, their
consultant, or even the supplier coalition, is difficult to overstate. Firstly, this
defines interfaces at which quality, deadline and other cooperation problems can
Table 4
Reasons for establishing supplier coalitions
1. Impossibility of providing all the requested supplies and services by individual suppliers
2. Lack of internal know-how
3. Lack of industrial property rights
4. Lack of prequalification
5. Better chance of receiving and managing the order with partners
6. Inclusion of local partners in the customer’s country (local content, local manufacturing)
7. Support by the partners (financing, acquisition, etc.)
8. Financing/export credit insurance from third countries
9. Cheaper delivery by the partner
10. Possibility of specialization
11. Reduction in project costs
12. Sharing of risk and liability
13. Impossibility of managing the total order volume by a single supplier
14. Neutralizing the competitors
15. Impossibility of appearing under our own brand or nationality
16. Special customer request for a cooperation or for nominated partners
Table 5
Decision-making steps when selecting cooperation partners
1. Rough determination of the form of cooperation and your own position
2. Criteria for determining the cooperation partners
3. List or portfolio of cooperation partners
4. Evaluation of potential cooperation partners
5. Negotiation and selection decisions
6. Mutual specification of the coalition form and the distribution of tasks
Project Cooperation
365
arise. And, secondly, this also determines the cooperation and coordination
requirements that occur when the distributed tasks have to be merged into a
marketable and functional whole. In most cases, a vertical breakdown will only
be considered for extremely complex and heterogeneous plants. In this case, a
horizontal breakdown will generally take place in a second step.
Every more detailed breakdown of a capital good creates additional interfaces.
These are risk factors and lead to coordination costs and possibly additional
transaction costs. However, on the other hand, occasionally the cost benefits of
specialist manufacturers can be exploited, if individual single tasks are separated
from a package. These need to be weighed against each other in each individual
case: integration quality benefits and the reduction of coordination costs versus
specialization benefits and other benefits (e.g. deadline-related benefits in the
division of labor).
The following partner selection criteria play a key role when deciding
which
company will take over a certain tasks. Of central importance is the question of who
will be responsible for the overall planning of the technical and commercial
proposal, the overall acquisition management and the management of the order
and project management. The decision on the management, occasionally also
referred to as overall control within the supplier association, is reached:
(a) Based on the dominance of certain components as part of the plant (example:
the dominance of electrical suppliers for power plants),
(b) Based on the dominance of process know-how (example: the dominance of the
supplier who is the process owner in the case of chemical plants),
(c) Based on the quantitative share (volume) of the order and
(d) Based on the dominance of commercial/organizational shares of the overall
performance.
Two special features arise in this respect: some companies are specialized in
“trading” capital goods and more complex plants. This means: they offer to manage
the processing of plant construction orders without having any (significant)
manufacturing capacities and often also without capacities for many of the required
services. For example, the focus on the planning of the overall design of the plant,
the acquisition activities, the process monitoring and the coordination management.
Any necessary process know-how is outsourced to specialist providers or
purchased.
The second feature is the opportunity of integrating special suppliers for the
delivery and service coordination, which is particularly important in competition
(material, personnel, deadline-related). For example, these providers may take over
the project management tasks. This gives them a key position in a supplier associa-
tion, which needs to be ensured both organizationally and contractually, so that they
have the relevant powers applicable for their overall responsibility. Also essential is
the contractual establishment of the partition and breakdown of services and tasks
amongst the suppliers with respect to risk aspects and the regulation of possible
changes (“claims”) as well as conflicts.
366
B. Gu¨nter
4.3.4
The Decision on the Cooperation Partner
Due to the associated risks, the decision on the partner(s) in a project cooperation
must be based on a comprehensive and systematic analysis, similar to that of a
formal supplier selection and evaluation. This at least requires the preparation of a
checklist of the important criteria. The following checklist provides an overview of
a few key criteria that should be analyzed in connection with the selection of
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